This invention relates to methods of transferring funds electronically between customer accounts which are stored in a network of computers.
One prior art method of transferring funds is disclosed in FIG. 1 of U.S. Pat. No. 5,465,206 (hereinafter the Visa patent). In this prior art method, a customer receives a bill from a biller; and in response, the customer mails a check back to the biller. This check is then presented by the biller to the biller's bank for payment. Then the biller's bank sends the check to a settlement bank which clears and settles the transfer of funds between the biller's bank and the customer's bank. Following this settlement step, funds are transferred by the biller's bank to the biller's account where it is available for withdrawal. However, this method of transferring funds is inherently limited in speed by the steps which require that a check be physically moved from the customer to the biller, then from the biller to the biller's bank, and then from the biller's bank to the settlement bank.
In a second prior art method of transferring funds (which is disclosed in FIG. 2 of the Visa patent), a customer responds to a bill from a biller by electronically sending a message to a service bureau, and this electronic message authorizes the service bureau to pay the bill. Upon receipt of the message, the service bureau writes a check on the customer's account in the customer's bank and presents that check to the service bureau's bank for payment. Then, the service bureau's bank sends the check to a settlement bank which clears and settles the transfer of funds between the service bureau's bank and the customer's bank. This sequence of steps is repeated many times for many customers of the biller. Thereafter, the service bureau sends the biller a list of all of the bills that were paid along with a single check for the total amount paid. With this method of transferring funds, the need for the customers to write and mail checks is eliminated. However, this method of transferring funds is still inherently slow because before the biller is paid, checks must be physically moved from the service bureau to the service bureau's bank, and then from there to a settlement bank where the checks are settled with each customer's bank.
In a third prior art method of transferring funds (which is disclosed in FIG. 3 of the Visa patent), a biller obtains regular periodic payments from a customer's account in a customer's bank with those payments being initiated by the biller, rather than the customer. With this method, the biller maintains a file which identifies the customer, the amount of the periodic payment, and the date on which each payment is due. To initiate each payment, the biller electronically sends a request for payment to the biller's bank; and in response, the biller's bank generates a debit request in a certain standard format, which is required by an automated clearing house (ACH). This debit request is then stored in the biller's bank, along with all other ACH debit and credit requests which the biller's bank generates for other customers. Thereafter, a batch of ACH debit and credit requests are electronically transmitted to the Federal Reserve or other ACH clearing institution; and by this transmission, net accounts between the biller's bank and the customer's bank are settled. With this method of transferring funds, the need to physically move checks from one location to another is eliminated. However, this method of transferring funds is still inherently slow due to a limitation that ACH debit and credit requests must be transmitted to the Federal Reserve or other ACH clearing institution at least one day before the biller's account in the biller's bank can be credited. See for example, page 105 of "The Federal Reserve System Purposes & Functions" by the Board of Governors of the Federal Reserve System, Washington, D.C., 1994.
In a fourth prior art method of transferring funds (the Visa method) which is disclosed in FIGS. 4-12 of the Visa patent, the biller's bank, the customer's bank, and a settlement bank are all intercoupled by an electronic payment network. With this method, a customer responds to a bill from a biller by ordering the customer's bank to pay the bill. In response, the customer's bank examines the customer's account to determine if sufficient funds are available to pay the bill or determine that the customer's bank is willing to take the risk of loss if funds are not available. If either determination is made, the customer's bank electronically sends a payment message through the payment network to the biller's bank. Each such payment message is also stored in the payment network where it is acted upon by a settlement subsystem which nets the funds that are being transferred by all payment messages between the customer's bank and the biller's bank. Thereafter, the settlement subsystem electronically sends a transfer order to the settlement bank which settles the net accounts between the customer's bank and the biller's bank. By this settlement step, funds are transferred by the biller's bank to the biller's account. With this method of transferring funds, the need to physically move checks from one location to another is eliminated.
However, a problem with the Visa method of transferring funds is that the payment messages are sent to the biller's bank without first examining the status of the biller's account in the biller's bank and examining the status of the net accounts in the settlement subsystem. Consequently, payment messages are received in the biller's bank and the settlement subsystem even when they should not be sent. This occurs, for example, when the biller's account has been closed, and when the net account of the customer's bank is too low to permit funds to be transferred. In the Visa method, there is no feedback of electronic control messages from the biller's bank and the settlement subsystem to the customer's bank. Thus, it is not possible for the customer's bank to a) notify the biller's bank and the settlement subsystem of a request to transfer funds, and subsequently, b) transfer the funds only if authorization to proceed is given by the biller's bank and the settlement subsystem. Consequently, with the Visa method, the need to reverse the transfer of funds occurs.
In an attempt to reduce the need to reverse a payment message, each customer bank stores a copy of a universal biller reference file (UBF) which contains information about each biller's account. However, this does not eliminate the need to reverse a payment message because the copied UBF files become out of date as soon as the status of a biller's account changes. Further, the copied UBF files multiply the total storage that is needed by the total number of banks. In addition, the copied UBF files say nothing about the status of the net accounts for each bank.
Accordingly, a primary object of the invention is to provide an improved method of transferring funds wherein all of the above problems are eliminated.